The Association Between S&P 500 Membership and Firm Valuation

Sammanfattning

This study examines whether firms included in the S&P 500 index are associated with higher valuations compared to firms that are not included in the index. To investigate this association, the study applies panel regression models and several robustness tests. The final dataset consists of 1,499,409 firm-month observations across 14,726 unique firms. The results from the main specifications, using both MTB and Tobin’s Q as valuation measures, show a positive and statistically significant association between S&P 500 membership and firm valuation. However, the robustness tests show that this association weakens when the comparison group is restricted to larger firms. In addition, the pre- and post-inclusion valuation study indicates that the estimated valuation difference emerges before inclusion and increases until the point of index inclusion, after which it gradually declines. However, the pre-inclusion pattern and the weaker coefficients in the size-restricted samples suggest that the association cannot be attributed solely to index membership. Overall, the findings should be interpreted as evidence of a positive association between S&P 500 membership and firm valuation, reflecting both pre-existing firm characteristics and possible inclusion-related mechanisms, such as anticipation, signaling, and demand pressure, rather than evidence that index membership alone explains the valuation difference.